Donald Trump Switches From a Trade War to a Currency War
President Donald Trump accused China and Russia of devaluing their currencies, violating the opinion of his own administration that no major trading partners are currency manipulators. The US President considers the financial policy of these countries unacceptable.
Trump declared yesterday that China and Russia are playing what he called a “currency devaluation game” at a time when the US Federal Reserve is raising interest rates. Such comments by the chairman of the White House caused pressure on the US dollar and fluctuations in yields of government bonds. The Bloomberg Dollar Index slipped to its lowest level since March 26.
The Treasury’s foreign currency report on Friday ratcheted up criticism of China’s failure to correct its trade imbalance with America and said the increasingly “non-market direction” of China’s economy presented a risk to global growth. China is evaluating the impact of a gradual yuan depreciation as the country’s leaders weigh their options in the trade spat with the US. A weaker yuan makes imports from China to the US cheaper, driving up America’s trade deficit. Donald Trump has repeatedly complained about the US trade shortfall with China, which reached $337 billion in goods and services last year.
Devaluation of national currencies can be carried out for the benefit of exporters, who receive foreign currency earnings and exchange for national currency. The administration of Donald Trump carries out a protectionist policy with respect to his own exporters, but the dollar rate does not go down artificially.